1,720,982 research outputs found
Private sector share of external debt and financial stability: evidence from bank loans
No full textIn the last two decades, the private sector has contracted a substantially larger share in the total amount of foreign-currency
international debt (private sector share of external debt), especially in developing countries. In this paper, I empirically examine the effect of this phenomenon on bank loan prices. I find that the private sector share of external debt negatively and significantly impacts the price of bank loans. This result supports the hypothesis that private sector debt contributes to international financial stability to a greater degree than sovereign debt. Nevertheless, this impact is canceled out in the presence of fixed exchange regimes that are unsuitable with respect to fundamentals. In such circumstances, the private sector may take advantage of capital market distortions that are maintained by official authorities and thus exposes the country to further financial instability. Additional results corroborate the observation that the gain in financial stability stems from more efficient use of funds and reduced monitoring costs
Renegotiation and the pricing structure of sovereign bankloans: Empirical evidence.
No full textIt is generally accepted that banks offer renegotiation services to
sovereign borrowers facing short-term liquidity shortages. However,
the literature has yet to find evidence of such services from
the pricing of sovereign bank loans. The research on the pricing of
sovereign bank loans has focused on interest spreads alone, while
the pricing structure typically includes an up-front fee, as well.
In this paper, I explore empirically the economic motivations for
such a pricing structure. I find that up-front fees are explained by
the probability of renegotiation and by proxies for informational
problems. My findings provide evidence that the unique pricing
structure of bank loans helps banks provide sovereign borrowers
with renegotiation services
Governing law of sovereign bonds and legal enforcement.
No full textAfter each of the spectacular financial distresses of major sovereign states, serious concerns raised about the economic inefficiency of the current international legal frames of sovereign debts. The sources of concern are: 1. The absence of institutionalized renegotiation setup that promotes orderly workouts alike the Chapter 11 in the USA; 2. The limited ability of creditors to seize assets of the sovereign borrower in default (absence of collateral). In practice, each loan contract includes a governing law that provides the legal framework for any dispute. The governing law of the contract is a state law, e.g., England law and New York law. The limitation in creditors’ ability to seize foreign states’ assets, the so-called foreign state immunity, is determined by the governing law of the loan contract. Unlike corporate debts, the governing laws of sovereign debts have major implications on the restructuring and the enforcement of the terms of the contract. In fact, the governing law constitutes the unique legal environment that governs any dispute that may arise. Instead, the jurisdiction where corporations are registered has major importance (e.g., Ayotte and Skeele, 2002; Wood, 1995).
By looking at the characteristics and the impact of governing laws on international bond amounts, this chapter investigates the second source of concern, i.e., the credibility of the legal threat of asset seizure (collateral) of sovereign defaulters. International bonds are non-local currency bonds, e.g., a dollar-denominated bond issued by Argentina and listed in New York or Luxembourg. I first analyze the foreign state immunity in England law and New York law, the most frequent governing laws of Eurobonds. I then examine whether governing laws are selected according to the features of the governing law in general as well as in connection to the bond characteristics (listing market and currency). I also examine the impact of the governing law on international bond amounts
Why Larger Lenders Obtain Higher Returns: Evidence from Sovereign Syndicated Loans
No full textLenders who make "large" funding commitments earn higher rates of return than those who make smaller commitments. We analyze a dataset of sovereign syndicated loan contracts to study this phenomenon. We show that the "large lenders" in the lending syndicates earn a "return premium", which is positively affected by the likelihood of future liquidity problems of the borrower. This finding suggests that the onus would be on the large lenders in particular to provide services such as liquidity insurance and coordinating the workout. The return premium also increases in the fraction of banks amongst the larger syndicate members, suggesting that banks are special lenders in terms of addressing idiosyncratic liquidity problems
International Corporate Debt Market
No full textResearch on international debt markets has chiefly investigated sovereign debt markets. We suggest a review of the different types of borrowers and the differences in the instruments. In particular we show that syndicated loans are an essential tool of international debt markets to monitor international markets borrowers. We also show by looking at the details of these instruments the mechanisms behind such tools
Loans versus bonds: the importance of potential liquidity problems of sovereign borrowers.
No full textDo sovereign borrowers care whether they attract funds through the sovereign loan market or the sovereign bond market? Research on the corporate debt market suggests that loans and bonds are fundamentally different. Loans are usually associated with a limited number of credit relationships while bond holdings tend to be more dispersed. Differences in the number of credit relationships implies that the incentives to screen and monitor borrowers are generally different for lenders and investors in bonds. Furthermore, banks, as important institutions on the supply side of the loan market, are special. Diamond and Rajan (2001) explain that their dependence on deposit financing can make banks superior monitors and Coleman et al. (2006) provides supporting evidence.
In this chapter we discuss a second reason why loans and bonds are different: lenders and bond holders may differ in their treatment of illiquid borrowers . In case illiquidity strikes lenders may allow for relatively efficient renegotiation, while dispersed bondholders may face severe coordination problems which can lead to substantial delay, or failure of loan renegotiations. This story is consistent with the model of Bolton and Scharfstein (1995) and Morris and Shin (2004) underscore the importance of coordination costs in sovereign debt markets. Banks may prove to be special lenders also when it comes to addressing borrower illiquidity. For example, Elsas and Krahnen (1998), Boot (2000), and others show that relationship banks act as liquidity insurers in situations of liquidity problems of borrowers
Going Beyond Counting First Authors in Author Co-citation Analysis
Get PDFThe present study examines one of the fundamental aspects of author co-citation analysis (ACA) - the way co-citation
counts are defined. Co-citation counting provides the data on which all subsequent statistical analyses and mappings
are based, and we compare ACA results based on two different types of co-citation counting - the traditional type that
only counts the first one among a cited work's authors on the one hand and a non-traditional type that takes into
account the first 5 authors of a cited work on the other hand. Results indicate that the picture produced through this non-traditional author co-citation counting contains more coherent author groups and is therefore considerably clearer. However, this picture represents fewer specialties in the research field being studied than that produced through the traditional first-author co-citation counting when the same number of top-ranked authors is selected and analyzed. Reasons for these effects are discussed
Courts and sovereign eurobonds : credibility of the judicial enforcement of repayment
Get PDFWhile focusing on the protection of distressed sovereigns, the current debate intended to reform the International Financial Architecture has hardly addressed the protection of creditors rights that varies among laws. I suspect however that this constitutes an essential determinant of the success of suggested solutions, especially under the contractual approach. Based on a sample of bonds issued by developing countries states in the period, January 1987 to December 1997, I find that, for given contract characteristics (e.g. listing markets and currency), the governing law is selected according to its ability to enforce repayment. However, although the New York law seems looser and incur larger enforcement costs than the England&Wales law, the former permits equivalent yearly credit amounts. I interpret this as a consequence of the existence of a larger set of valuable assets (e.g. trade) in the US that constitute implicit securities. My findings yield important implications for the reforms. In particular, provided that there exists a seemingly equivalent enforcement credibility between England and New York laws, the prompt implementation of the contractual approach solution should constitute a valuable first step toward efficient sovereign debt markets. October 2003
Price discrimination on syndicated loans and the number of lenders : empirical evidence from the sovereign debt syndication
No full textSyndicated loans and the number of lending relationships have raised growing attention. All other terms being equal (e.g. seniority), syndicated loans provide larger payments (in basis points) to lenders funding larger amounts. The paper explores empirically the motivation for such a price discrimination on sovereign syndicated loans in the period 1990-1997. First evidence suggests larger premia are associated with renegotiation prospects. This is consistent with the hypothesis that price discrimination is aimed at reducing the number of lenders and thus the expected renegotiation costs. However, larger payment discrimination is also associated with more targeted market segments and with larger loans, thus minimising borrowing costs and/or attempting to widen the circle of lending relationships in order to successfully raise the requested amount. JEL Classification: F34, G21, G33 This version: June, 2002. Later version (october 2003) with the title: "Why Borrowers Pay Premiums to Larger Lenders: Empirical Evidence from Sovereign Syndicated Loans" : http://publikationen.ub.uni-frankfurt.de/volltexte/2005/992
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